I have an opportunity to pay off my mortgage- $280, left on it.000?

There are two ways of looking at this situation........the mathematical side and the behavioral side. Let's take a look at the mathematical aspect first.

Most would say that mathematically speaking, you should invest the money. That is because they assume that your mortgage is at an interest rate of 5-6% and you could invest at upwards of 12% (the stock market average over the last 80 or so years). That is a 6% spread right? Well, we have to analyze how we are looking at things. For instance, we must take taxes on that 12% into account. Also, it is important to note that we are comparing an investment with risk to an option that has no risk at all (if you pay off your mortgage it is paid off 100% of the time). Therefore, if we leave the discussion as is, we are comparing apples to oranges. Once we take taxes and risk (beta) into account, that 12% stock market average looks suspiciously like 5-6%. This is assuming that you are already maxing out tax sheltered investments (you should be investing at least 15-20% of your income for retirement before adding extra payments to your home).

From a behavioral standpoint, I personally hate debt. When you pay cash for something or pay off a loan balance it just feels good. The car drives a little different and the grass in the back yard just feels a little softer beneath your feet. You have a sense of accomplishment and satisfaction that doesn't come from borrowing money to purchase things. As the Scriptures say, the borrower truly is slave to the lender. I personally would be debt free by the end of the day because I strive for the feeling of complete financial independence. And do you know how wealthy you will become when you automatically deduct what used to be a mortgage payment into a good growth stock mutual fund each month? Congratualations on whatever decision you make.

Hope this helps!

Financially speaking, keeping your mortgage and investing more is probably the better idea. Your mortgage interest rate is likely low (because it's backed by your house), and the interest you do pay is tax deductible.

If you are not maxing out your retirement savings I would suggest doing that before paying extra on your mortgage. Retirement accounts (401k & IRA) have tax advantages that make them very beneficial. The 401k maximum is $15,500/year and the IRA max will is $5,000 each in 2008 and will be $6,000 each when you are 50 years old.

If you are maxing those retirement accounts out, then paying off your mortgage isn't a bad thing to do. It's probably not quite as beneficial as investing additional money, but it is much safer. And as you mentioned it would make you feel more secure which is always a big plus.

Best of luck in your financial endeavors!

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